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Fiscal Year Ended March 31, 1983 






Queen's Park 
Toronto, Ontario 
Telex 06217880 

October 27, 1983 

O.C., Q.C., B.A., LL.D. 

Lieutenant Governor of the Province of Ontario 


I take pleasure in submitting the 
Twenty Third Annual Report of the Ontario Energy 
Board for the fiscal year ended March 31/ 198 3. 


Minister of Energy 


Ontario 9th Floor 

P 14 Carlton Street 

bnergy Toronto, Ontario 

Board M5B 1J2 

October 25, 1983. 

Honourable Philip Andrewes, 
Minister of Energy/ 
Queen ' s Park , 
Toronto, Ontario. 
M7A 2B7 

Dear Minister: 

I have the honour to present herewith the 
Annual Report of the Ontario Energy Board for 
the fiscal year ended March 31, 1983. 

Resentfully submitted, 


Robert H. Clendining, * 





Fiscal Year Ended March 31, 1983 

Copies available at $2.50 prepaid from Ontario Government 
Bookstore, 880 Bay Street, Toronto; telephone (416) 965-2054. 

Out-of-town customers please write (enclosing cheque or money 
order payable to the 'Treasurer of Ontario') to Ministry of 
Government Services, Publications Services Section, 5th Floor, 
880 Bay Street, Toronto, Ontario M7A 1N8. 

Telephone: (416) 965-6015 

Toll-free long distance: 1-800-268-7540 
Northwestern Ontario 0-Zenith 67200. 

ISSN 0317-4891 7C 10:83 




Role of the Board 1 

Major Activities of the Board 1 


Natural Gas Rates 3 

Introduction 3 

The Consumers' Gas Company Ltd 5 

Inter-City Gas Corporation 8 

Natural Resource Gas Limited 9 

Northern & Central Gas Corporation Limited 10 

Tecumseh Gas Storage Limited 12 

Union Gas Limited 13 

Wellandport Gas Limited 14 

Gas Storage 15 

Certificates and Franchises 15 

Pipeline Construction 15 

Pipeline Exemptions 16 

Arbitration 16 


Ontario Hydro 18 

Natural Gas Used as a Feedstock 21 


Ontario Pipeline Coordination Committee 22 

Regulation Amendments . 23 

Letters of Concern and Customer Complaints 24 

Administration 25 


*A' Jurisdiction of the Board 

'B - 1' Residential Rates Changes Granted 
- The Consumers' Gas Company Ltd 


Residential Rates Changes Granted 
- Northern and Central Gas Corporation 

'B - 3' Residential Rates Changes Granted 
- Union Gas Limited 


Selected Statistics 
- Major Ontario Natural Gas Utilities 

»D' Principal Natural Gas Pipelines 
In Ontario 

Many of the quantitative references in this Report are expressed 
in metric units. The following conversion table is provided for 
your convenience. 

1 cubic metre (m3)=0.0353 thousand cubic feet (Mcf) 

1 thousand cubic metres ( 1 3 m3) =n. 0353 million cubic feet (MMcf) 

1 kilometre(km)=0. 621 4 miles 

1 thousand cubic f eet(Mcf )=28. 328 cubic metres (m3) 

1 million cubic f eet( MMcf ) =28. 328 thousand cubic metres (103m3) 

1 mile=1.609 kilometres (km) 

- 1 - 


Role of the Board 

The Board has jurisdiction over and responsibility 
for various energy related matters which are outlined in 
Appendix 'A*. Under the Ontario Energy Board Act, its 
Regulations and other relevant statutes, the principal 
responsibilities of the Board may be summarized as: 

regulation of natural gas rates; 

approval of municipal natural gas franchises; 

approval of hydrocarbon pipelines construction; 

authorization of expropriations of land for 


regulation of gas utility accounting procedures; and 

advising on any question respecting energy. 

A natural gas utility operating in Ontario must 
obtain Board approval before it can change its rates, 
construct certain facilities or enter into franchise 
agreements with municipalities. All such matters are 
dealt with at public hearings before the Board. 

In its advisory capacity, the Board responds to 
references from the Minister of Energy regarding Ontario 
Hydro, the Minister of Natural Resources regarding certain 
oil and gas production concerns, and the Lieutenant 
Governor in Council on any question respecting energy. 

Major Activities of the Board 

During the fiscal year rate related matters were 
prominent before the Board. Major factors were the 
continuing increase in the cost of natural gas from 
Western Canada and the increasing revenue requirements of 
the utilities. 

- 2 - 

In addition to the annual reference from the Minister 
of Energy regarding Ontario Hydro bulk power rates, there 
was a total of 16 applications for gas rate changes as 
well as 12 other proceedings. These are summarized in 
this Report. 

Improvements to the overall regulatory process, 
referred to in previous Annual Reports, are working well. 
The Board will be taking other initiatives such as the 
establishment of common filing requirements, annual 
monitoring forms, and is conducting studies on an 
industry-wide basis designed to improve and expedite the 
hearing process. 

Since many of the proceedings before the Board are in 
respect of rates changes, a brochure entitled "How Does a 
Gas Utility Change Its Rates?" was published in the 
previous fiscal year to assist natural gas users and the 
general public to better understand the process whereby 
rates are changed. The brochure was sent to Members of 
the Legislature, all Ontario municipalities, the media and 
others, and is available on request. A copy is enclosed 
with this Report. 

- 3 - 


Natural Gas Rates 

As noted previously the two main causes of increasing 
natural gas prices in Ontario continue to be the cost of 
gas and the operating revenues required by the utilities. 
As shown in Appendix 'B' the most frequent increase and 
the largest in dollar terms was the wholesale cost of 
gas. This represents what Ontario gas utilities must pay 
for natural gas delivered to Ontario from Western Canada. 
This wholesale gas cost is a combination of the price at 
the Alberta border as determined by the Alberta and 
Federal governments, TransCanada PipeLines Limited 
transportation tariffs as established by the National 
Energy Board, and excise and other taxes set by the 
Federal Government. 

Comparatively speaking, the in-province distribution 
costs are a relatively small component of the gas rates 
paid by utility customers. These revenues, which are 
required by the utilities to continue operations and to 
raise necessary capital, are the subject of careful 
scrutiny at Board public hearings. Since the Ontario 
Energy Board Act requires that any rates change be 
approved by the Board, the impact of the Federally- imposed 
gas cost increases are similarly scrutinized during a 
hearing. The Board must be satisfied that these warrant 
being passed through to customers, and at the same time 
must determine whether the utility can absorb some or all 
of such costs. 

- 4 - 

During the fiscal year increases in the wholesale 
cost of gas imposed on the utilities by the Federal 
government were as follows: 

Effective Date Amount of Increase 

August 1 f 1982 $9.38 per 1 3 m 3 

September 1 , 1982 $4.51 per 10 3 m 3 
February 1, 1983 $2.24 per 10 3 m 3 

Typical residential customer rates changes granted to 
each of the three major Ontario gas utilities during the 
fiscal year, together with approximate annualized costs, 
are shown in Appendix 'B'. 

- 5 - 

The following are highlights of rates and other 
applications considered by the Board since the previous 
Annual Report. 

The Consumers' Gas Company Ltd. 

Consumers' distributes natural gas in parts of southern 
and eastern Ontario, including Metropolitan Toronto. It 
also operates under the names of Brockville Gas, Grimsby 
Gas, Ottawa Gas and Provincial Gas. 

This utility's main rates application required 43 
hearing days over a period of 7 months because there was an 
unusually large number of intervenors, as well as several 
complex issues. 

The utility had originally claimed a deficiency of 
$83 million which it later reduced to about $48 million. 
During Phase I of the hearing the Board allowed a deficiency 
of $20 million on an interim basis effective December 20, 
1982. At the completion of Phase I, in its Reasons for 
Decision of January 26, 1983, the Board determined a rate 
base of $1,155,729,000, an allowed rate of return thereon of 
12.52 percent, including 15.75 percent on common equity, and 
a total revenue deficiency of $20.1 million. The Board 
concluded, therefore, that no further rate increases were 
justified. Prior to this, on November 23, the Board had 
approved interim rate increases permitting Consumers' to 
recover wholesale gas cost increases which occurred during 
the summer. 

In its original application Consumers' requested the 
Board to approve increases in rates which would include the 
collection of income taxes on a 'normalized' or deferred 
basis. This request was subsequently withdrawn, and 

- 6 - 

resulted in the remaining increased revenue requirements 
from each customer class being not mcrre than 6 percent, 
exclusive of any upstream gas cost increases that might have 
been approved by the Federal Government. 

Consumers* also proposed changes to rate structures, 
including an increase in the fixed monthly charge for 
residential customers from $6.27 to $18.30 and a surcharge 
for gas consumed in January, February and March with off- 
setting charges for the balance of the year. This proposal 
was also withdrawn. 

Nonetheless, the utility requested the Board to 
consider and rule on the principles and merits of deferred 
income tax recovery and on the philosophy that led to the 
three-part residential rate proposal i.e. - customer charge, 
capacity charge and commodity charge. This request was 
rejected by the Board. 

The pre-hearing publicity given to the proposed fixed 
monthly charge and surcharge aspects of Consumers' original 
application resulted in the Board receiving a substantial 
number of letters of concern and a petition which was 
directed to the Board, the Lieutenant Governor in Council 
and the Legislative Assembly. 

The Inflation Restraint Act, 1982, enacted on 
September 21, affected companies whose prices are regulated 
by Ontario public agencies. Under the Act, certain economic 
criteria were established as a basis for determining 
appropriate increases. Several intervenors referred to the 
Federal and Ontario restraint programs and requested the 
Board to limit any rate increases to the levels established 
by these programs. All counsel participating in the hearing 

- 7 - 

addressed the question of whether or not the Ontario 
legislation required the Board to apply the restraint 
criteria in approving or fixing just and reasonable rates. 
The Board did not decide that question in these proceedings, 
since in the Board's view such criteria had in any event 
been met. 

During the course of the hearing the Industrial Gas 
Users Association, Cyanamid (Canada) Inc., and the Urban 
Development Institute, Apartment Group, objected to the 
utility's method of calculating the increased rates. 
Consumers' had refused to answer certain of these 
interveners' interrogatories which they considered necessary 
for effective opposition to the utility's methods, and each 
made a motion requesting the Board to order Consumers' to 
answer the interrogatories. The Board denied Cyanamid 's 
request, and part of the Urban Development Institute's 
request, but required that the balance of the 
interrogatories be answered. The Board's Reasons for 
Decision relating to Cyanamid 's motion were the subject of a 
petition to the Lieutenant Governor in Council by Cyanamid. 
The Lieutenant Governor in Council directed the Board to 
re-hear the issue, but before the Board could comply with 
this direction Consumers' volunteered to provide the 
material requested by Cyanamid. 

Subsequent to the conclusion of the hearing, the Board 
re-opened the proceedings for the purpose of hearing 
evidence regarding Consumers' actual results for fiscal 1982 
compared with the estimated results it had submitted in 
September 1982. 

- 8 - 

On February 23, 1983, the Ontario New Democratic Party 
Caucus petitioned the Lieutenant Governor in Council to 
disallow that part of the rate increase relating to revenue 
deficiency in excess of $16 million so that Consumers' 1983 
net income would be frozen at its 1982 level. This petition 
was pending at the end of the fiscal year. (A similar 
petition, referred to in the previous Annual Report, was 
denied by the Lieutenant Governor in Council on July 9, 

Phase II of the hearing concluded on March 4, 1983 and 
the Board's decision was pending at the end of the fiscal 
year. (Reasons for Decision were subsequently issued on 
April 26, 1983). 

Inter-City Gas Corporation 

Inter-City is a Manitoba-based gas utility which 
distributes gas in and west of Fort Frances, Ontario. An 
unusual feature of this utility's distribution system is its 
reliance on one large industrial customer (Boise Cascade 
Canada Limited) for more than 90 percent of its total 
sales. This situation has a major effect on the utility's 
entire operation. 

Inter-City Gas Corporation (Ontario Division), being a 
wholly owned subsidiary, has no capital structure of its 
own. Consequently, the Board has been obliged to set an 
allowable rate of return based on a hypothetical capital 

As noted in the previous Annual Report, the Board's 
decision on Inter-City's main rates application was pending 
at the end of that fiscal year. It was subsequently issued 
April 29, 1982 with new rates effective June 1, 1982. 

- 9 - 

Inter-City had requested no change in its allowable 
rate of return and the Board allowed 15.5 percent on common 
equity and 11.69 percent on a rate base of $1,068,116 at 
December 31 , 1980. 

An issue during the hearing was the establishment of a 
reasonable allocation of the corporate gas costs. In its 
Reasons for Decision the Board accepted the utility's 
proposals on the allocation of gas costs to the Ontario 
Division, and determined a revenue deficiency of $104,330 
which resulted in an increase in gas rates of 2.78<fc per Mcf 

Inter-City was granted the following interim rate 
increases during this fiscal year: 

Effective Date Amount of Increase Reason 

Oct. 1, 1982 32.14<f per Mcf wholesale gas costs 

Mar. 1, 1983 5.45<f per Mcf wholesale gas costs 

The Board also approved rates under which Inter-City 
would provide temporary winter service to Boise Cascade 
Canada Limited from November 1, 1982 to April 1, 1983. 

Natural Resource Gas Limited 

Natural Resource Gas (NRG) is a small utility serving 
Aylmer and surrounding communities and purchases its natural 
gas supply from Union Gas, Consumers' Gas and local 
producers . 

- 10 - 

NRG's first main rates hearing, which began in February 
1982, reconvened in May 1982 after the filing of additional 
information requested by the Board. The Board's Reasons for 
Decision of August 31, 1982 determined a total revenue 
deficiency of $205,879. Of this amount, $203,000 was 
already being recovered as a result of earlier interim 
increases. The balance of $2,879 went towards the 
equalization of rates throughout the system. As a result 
the Medina-Belmont rate differential was reduced from 
approximately 55<f to 47<f per Mcf effective September 1, 

During the fiscal year NRG was granted an interim rate 
increase of 2(f per Mcf on June 1 because of wholesale gas 
cost increases, and a further increase on September 1 of 8^ 
per Mcf due to a revenue deficiency relating to Belmont 
division customers only. On December 1, 1982, as a result 
of further wholesale gas costs, rates were increased 38<fr per 
Mcf to all customers and an additional 47<j: per Mcf to 
Belmont division customers in order to equalize the rates 
for the entire system. 

Northern and Central Gas Corporation Limited 

Northern and Central distributes natural gas in parts 
of northern and southeastern Ontario. 

The hearing of this utility's rates application 
commenced on September 27 and concluded on November 30, 
1982. This was the first time that Northern and Central had 
used a prospective test year (calendar year 1983) to 
calculate its rate base, cost of service and revenue 
deficiency and, as a result, the utility's budgeting 
methodology was a major issue. 

- 11 - 

The Inflation Restraint Act, 1982 became effective 
September 21, 1982 and had a compliance period of 12 months, 
•which impacted Northern and Central's interim rate increase 
granted February 11, 1983 as well as the prospective test 
year. Counsel participating in the hearing addressed the 
question of whether or not this Act required the Board to 
apply the restraint criteria in approving or fixing just and 
reasonable rates. The Board decided that it could not do 

There were four interim decisions during the course of 

the proceedings. By Orders dated September 3 and 

October 12, 1982 the Board allowed the utility to pass 

through increases in the wholesale cost of gas. 

On February 11, 1983 the Board issued Reasons for 
Decision allowing the pass-through of increased wholesale 
gas costs effective February 1, 1983, and interim rate 
increases to reflect a revenue deficiency of $10,000,000. 

In its Reasons for Decision of March 8, 1983 the Board 
determined a rate base of $237,986,695, an allowed rate of 
return thereon of 12.65 percent including 16.00 percent on 
common equity, and a pre-tax revenue deficiency of 

By Order- in-Council dated March 16, 198 3 the Board was 
prevented from issuing an Order implementing its March 8 
Reasons for Decision because the Minister of Consumer and 
Commercial Relations had referred the decision to the 
Inflation Restraint Board for consideration. The matter was 
still under review at the end of the fiscal year. 

- 12 - 

Tecumseh Gas Storage Limited 

Tecumseh provides underground gas storage facilities in 
Lambton County to serve The Consumers' Gas Company Ltd. It 
does not distribute natural gas. 

On February 1, 1982, Tecumseh applied for increased 
rates and other charges for the storage and transportation 
of gas. The hearing and concluded on June 15, 1982 after 
5 days of hearing. The test year was Tecumseh' s fiscal year 
ending March 31, 1983. On the basis of an average rate base 
without annualization, the utility claimed a revenue 
deficiency of $2,578,400 on an annual basis effective April 
1, 1983. It also claimed that if an August 1, 1983 
effective date was used, then the deficiency would be 
$3,252,600, resulting from the effect of regulatory lag. On 
a claimed rate base of $53,234,879, a major issue was the 
valuation of the storage pools and in particular the storage 
rights obtained from Imperial Oil Limited. 

In its Reasons for Decision of July 20, 1982 the Board 
determined the total rate base to be $51,260,781 and that a 
reasonable allowance to be included in rate base for the 
cost of the gas storage rights acauired by Tecumseh was the 
$13,494,749 claimed by the utility. The Board determined an 
allowable rate of return on the rate base of 12.39 percent 
including 15.00 percent on common equity. These findings 
resulted in a revenue deficiency of $2,417,993. The 
effective date of increase in rates was established as 
May 1, 1983. 

- 13 - 

Union Gas Limited 

Union distributes natural gas in most of southwestern 

As noted in the previous Annual Report, Dow Chemical 
Canada Inc. applied to the Divisional Court for leave to 
appeal the Board's decision on Union's application relating 
to Petrosar Limited which increased rates effective 
February 1, 1982. Leave to appeal was granted in March; the 
appeal was heard in October 1982, and in December 1982 the 
court denied the appeal. In January 1983 Dow requested, and 
was granted, leave to appeal the Court judgment. The appeal 
was argued before the Court of Appeal in May 1983, and 
denied on August 16, 1983. 

Also previously noted was the filing of Union's main 
rates application in October 1981. This application was 
heard by the Board in January and February of 1982. In its 
Reasons for Decision of April 8, 1982 the Board determined a 
rate base of $713,350,000, an allowed rate of return thereon 
of 13.08 percent including 16.75 percent on common equity 
and a revenue deficiency of $31,062,000 resulting in rate 
increases effective April 15, 1982. 

During the course of that hearing, rate of return, the 

capital budgeting process, and the obligation to serve were 

issues reviewed by the Board. The Board ordered Union to 

file a report on the impact of its system expansion on 

customer rates, and a study to examine the degree of discri- 
mination and cross-subsidization within the General Service 

- 14 - 

A major issue in that hearing was Union's practice of 
offering group billing to certain customers in the General 
Service Rate classification. After hearing evidence from 
boards of education, municipalities and commercial and 
industrial users, the Board determined that this practice 
was unduly discriminatory and detrimental to the other 
customers in this rate class, and that group billing for 
municipalities and school boards on non-contiguous 
properties was to be discontinued. 

Later in the fiscal year changes in the wholesale price 
of natural gas from Western Canada resulted in residential 
rate increases effective December 13, 1982. 

A new rates application for Union's fiscal year 1984 
was filed by the utility in September 1982. This 
application was heard by the Board in December 1982 and in 
January and February 1983. The decision was pending at the 
end of the fiscal year. (Board Reasons for Decision were 
subsequently issued on April 22, 1983). 

Wellandport Gas Limited 

Wei land port is a small natural gas utility serving 
customers in the Townships of West Lincoln and Wainfleet in 
the Regional Municipality of Niagara. It produces most of 
its own natural gas but also purchases some from Union Gas 
Limited . 

The Board issued an interim Order increasing 
Wellandport' s rates by approximately 23<t per Mcf for gas 
billed on and after August 1, 1982 due to increased Federal 
natural gas taxes and gas purchase costs. 

- 15 - 

Gas Storage 

During the fiscal year the Board approved the parties, 
term and storage volume of a short-term storage agreement 
whereby Union would store natural gas for Consumers'. The 
Board also approved a storage agreement between Tecumseh Gas 
and Consumers', the effect of which was to convert an 
existing agreement to metric units and to slightly increase 
storage volumes. Also approved was an amendment to an 
agreement between Union and the Kingston Public Utilities 
Commission which has increased the Commission's maximum 
storage balance and contract demand. 

Certificates and Franchises 

During the fiscal year the Board granted a certificate 
of public convenience and necessity to Northern and Central 
Gas Corporation Limited for the construction of works to 
supply natural gas to the Town of Valley East. 

The Board also approved or prescribed the terms and 
conditions of 5 franchise agreements for the distribution of 
natural gas as follows: 

Consumers' Gas 

Northern & Central Gas 
Wellandport Gas 

- County of Renfrew*; 
Regional Municipality of 
Durham*; Town of Rockland 

- Township of Winchester 

- Township of West Lincoln* 

♦municipalities enfranchised for the first time. 

Pipeline Construction 

The Board granted Union Gas Limited leave to construct 
a 2.75 kilometre looping section of its existing Hanover- 
Walker ton transmission pipeline, in the Town of Hanover. 
Leave was granted subject to certain conditions relating 
primarily to environmental matters. 

- 16 - 

Pipeline Exemptions 

In special circumstances the Board may exempt a person 
from obtaining leave to construct a particular transmission 
pipeline. The following two exemption Orders were made 
during the fiscal year. 

The Consumers' Gas Company Ltd. was granted an 
exemption for a short section of transmission line to 
connect its existing Haley Station lateral to the new 
TransCanada PipeLine North Bay Short Cut Line in the 
Township of Ross, County of Renfrew. 

Union Gas Limited was granted an exemption to replace 
two short sections of its Amherstburg pipeline in the 
Townships of Anderdon and Sandwich West, County of 


On July 16, 1982 the Board issued its Reasons for 
Decision on the Bentpath Pool applications referred to in 
the previous Annual Report. This decision dealt with three 
applications to determine compensation payable for storage 
rights frcm various landowners in the Township of Dawn, 
County of Lambton. Three of the landowners had no storage 
agreements with Union Gas, but several had executed 
agreements purporting to vest storage rights in Union Gas. 
The latter group claimed that the agreements were invalid 
because they had been obtained through misrepresentation. 
The Board held that it had the jurisdiction, as part of its 
broader administrative function, to determine the validity 
of these agreements for the purposes of considering 
compensation under section 21(2) and (3) of the Ontario 
Energy Board Act. The Board determined that most of the 
agreements were valid and, consequently, only five 
landowners had standing before the Board on the issue of 
compensation . 

- 17 - 

The Board then proceeded to determine fair, just and 
equitable compensation for these landowners recognizing the 
principles contained in the Expropriations Act. It was 
decided to determine compensation based on the market value 
for gas storage rights at the time of this Decision and 
taking into account any relevant trends which were evident 
for the future. 

The Board concluded that compensation from 1974 to 1982 
should be $18.50 per annum per acre and from 1983 to 1990 
$24.00 per annum per acre to be paid each year in advance, 
with interest at 11.98 percent on all amounts outstanding. 
The Board directed Union to pay the landowners, except for 
the Township of Dawn, on a proportional basis for the gas 
that remained in the Bentpath Pool at the time storage 
injection commenced as if the residual volumes of 466,216 
Mcf had been produced on July 31 , 1974 at the rate of 2<£ per 
Mcf plus interest. The Board also ordered additional 
payments of $100 per well per year up to and including 1982 
and $300 per well per year from 1983 to 1990 inclusive. 

The landowners had also requested the Board to rescind 
its earlier Orders which allowed Union to join the interest 
of the landowners in the Bentpath Pool and to inject gas 
into it. These requests were rejected on the grounds that 
they were contrary to the public interest. 

In conclusion the Board ordered Union to pay the 
reasonable legal , appraisal and other costs of the five 

- 18 - 



Ontario Hydro 

A reference was received from the Minister of Energy on 
February 12, 1982 requesting the Board to examine and report 
on the 1983 bulk power revenue requirement of Ontario Hydro 
and the seasonally and time-differentiated rates proposed 
for 1983. Due to the significant changes proposed in 
Hydro's rate structure, the Board divided the hearing into 
two Phases, and heard evidence as follows: 

Phase I - Bulk power revenue April 21 - May 14, 1982, 

Phase II - Cost allocation June 1 - June 30, 1982. 

and rates 

Written argument was submitted by the various parties at the 
conclusion of each Phase. 

Ontario Hydro initially proposed a net revenue require- 
ment of $3,617 million for 1983 compared to $3,064 million 
for 1982. Of the requested increase $110 million was 
expected to be derived from increased sales leaving 
$44 3 million to be recovered through a proposed rate 
increase of 13.9 percent. In final argument Hydro increased 
its net revenue requirement by $54 million which resulted in 
a final requested increase of 15.7 percent. 

In its August 31, 1982 Report to the Minister, the 
Board recommended that the 1983 revenue requirement be 
reduced by $161.6 million. This effectively reduced the 
proposed rate increase to 8.8 percent. 

The Board made the following specific recommendations 
and comments: 

- 19 - 

Recommendations Relating to Cost Allocation and Rate Design 

1) The Composite Peaking Plant (CPP) concept should 
be adopted for purposes of determining generation 
capacity costs. 

2) The winter rating period should consist of the 
months October through March and the summer season 
consist of the months April through September. 

3) The Expected Unsupplied Energy (EUE) concept 
should be adopted for the distribution of capacity 
costs to pricing periods. 

4) A sixty minute demand interval for purposes of 
assessing demand charges should be accepted. 

5) The bulk power rates should be seasonally and 
diurnally differentiated although the diurnal 
energy charge differential should be nominal and 
not cost-based in 1983. 

6) That the designations Interrupt ible A and Inter- 
ruptible B rates be discontinued and replaced by 
an interrupt ible rate classification designated 
'Capacity Interruptible' . 

7) The Capacity Interruptible Rate should not contain 
a rebate based upon kilowatt interruption per hour 
as proposed. 

8) Hydro should not proceed at that time with its 
proposal to negotiate rates with certain large 

9) Time-Of-Use (TOU) rates should be assessed on all 
energy delivered to the bulk power customers on 
and after January 1, 1983. 

10) The costs as reduced should be passed through the 
cost-allocation process in arriving at time- 
differentiated rates. 

Recommendations Relating to Future Hearings 

1) That Hydro produce for the Board at the next 

hearing such information on coal supply contracts 
as is customarily supplied by utilities appearing 
before their regulatory agencies. 

- 20 - 

2) That Hydro be prepared to show cause at next 
year's hearing as to why the Board should not 
recommend termination of the NPD agreement and the 
moving of the training and testing to some other 
nuclear facility. 

3) That Hydro's apparent practice of paying overtime 
to its engineering and management staff be closely 
examined at the next hearing. 

4) That Hydro expedite its current review of heavy 
water production and include consideration of all 
accounting aspects of the program and report at 
the next hearing. 

5) That Hydro pursue further the sinking fund alter- 
native as part of its debt retirement program and 
report at the next hearing. 

6) That Hydro examine the adequacy and effectiveness 
of the control of capital costs and report at the 
next hearing. 

Recommendations Relating to Other Matters 

1) That Hydro reconsider policies with respect to: 

- net income provision in the costing of 
internal transfers of electricity. 

- costing of steam supplied to the BHWP. 

- costing of commissioning energy. 

2) That Hydro proceed with its plan to relocate many 
of its head office staff to a location other than 
downtown Toronto and it again consider disposing 
of its former head office building. 

3) That Hydro review the policy of not capitalizing 
the development costs of major projects prior to 
their authorization by Order-in-Council . 

4) That Hydro check and report yearly on each of the 
factors in its determination of the provision for 
the cost of nuclear decommissioning. 

Comments for Consideration of the Minister 


An early report from the committee investigating 
Hydro's net income would be of assistance to the 

Board . 

- 21 - 

2) The Board was also of the opinion that a review of 
bulk power rates will become increasingly diffi- 
cult when considered in isolation from retail 
rates.. The Minister may wish to provide an 
appropriate forum for such investigation. 

Natural Gas Used as a Feedstock 

On February 9, 1983 by Order-in-Council 316/83 the 
Lieutenant Governor in Council directed the Board to hold a 
public hearing and report on aspects of natural gas supply 
and pricing of concern to Ontario industries using natural 
gas as a feedstock. 

Notices of the Order-in-Council were published 
nationwide in March and May subsequent to the end of the 
fiscal year. The hearing was scheduled to begin July 18, 

The Board will hear submissions concerning the natural 
gas feedstock industries relating to two major groups of 

a) alternative gas supply arrangements, other than 
the traditional purchase from regulated 
distributors and, 

b) a province-wide common rate for natural gas used 
as a feedstock. 

- 22 - 


Ontario Pipeline Coordination Committee (OPCC) 

As noted in the previous Annual Report, the OPCC is an 
interministerial committee chaired by the Board's Pipeline 
Coordinator. Principal participants are the Ministries of 
Agriculture and Food, Consumer and Commercial Relations, 
Environment and, Natural Resources. Others who participate 
in the Committee's work, depending upon the impact of 
specific pipeline projects, are the Ministries of 
Citizenship and Culture, Municipal Affairs and Housing, 
Energy, and the Niagara Escarpment Commission. 

The purpose of the OPCC is to ensure that pipelines 
have minimal undesirable effect on the land by requirinq 

environmentally sensitive areas be avoided in route 


landowners be adequately notified and informed; 

construction procedures and schedules be developed to 

cause the least disturbance to the riqht-of-way and 

surroundings; and 

clean-up and restoration measures be responsibly 

implemented to restore the right-of-way to as good a 

condition as existed before the project was started. 

During the fiscal year the OPCC assisted Board counsel 
in the hearing of pipeline applications and recommended 
conditions of approval to the Board. It also monitored 
construction and site restoration to ensure that the 
conditions of Board Orders were implemented. 

The OPCC also assisted the Ministry of Energy in 
reviewing various projects related to the Federal government 
Distribution System Expansion Program (DSEP) for natural 

- 23 - 

In addition, the OPCC monitored National Energy Board 
approved construction of a TransCanada PipeLines Limited 
large diameter, high pressure natural gas transmission line 
from North Bay to Morrisburg. It also monitored 
construction of looping sections of existing pipelines by 
TCPL and Union Gas Limited in northern and southern Ontario 

There are over 13,000 kilometres of transmission 
pipeline in Ontario transporting natural gas, crude oil and 
petroleum products (see Appendix 'C'). During the fiscal 
year the OPCC was involved in monitoring various stages of 
construction of some 575 kilometres of natural gas 

Regulation Amendments 

Ontario Regulation 700, R.R.O. 1980 was amended twice 
during the fiscal year. Ontario Regulation 805/82 exempted 
sellers of compressed natural gas sold as a motor vehicle 
fuel from rate regulation under section 19 of the Ontario 
Energy Board Act. This is intended to encourage the use of 
natural gas as a vehicle fuel. The major gas distributors 
are required to keep special accounts if they wish to take 
advantage of this exemption. 

Ontario Regulation 820/82 exempted MICC Investments 
Limited and The Mortgage Insurance Company of Canada from a 
public hearing required by section 26 of the Act in relation 
to their proposal to acquire shares and warrants of Inter- 
City Gas Corporation. This was a major Canada-wide 
transaction in which MICC and Inter-City acquired shares of 
each other. The impact on Ontario customers was expected to 
be insignificant. 

- 24 - 

Letters of Concern and Customer Complaints 

In Board Notices of Application (which are published in 
newspapers having major circulation in Ontario) provision is 
made for those who do not wish to actively participate in 
the hearing to write to the Board expressing any concerns 
they may have about the application. These letters are 
reviewed by Board staff when preparing for the hearing and 
are summarized at the hearing by Board Counsel. In this 
fiscal year the Board received 667 letters of concern and 
several petitions, as compared to 57 letters in the previous 
fiscal year. 

In addition to letters of concern regarding specific 
applications, the Board also receives letters from natural 
gas customers relating to a variety of difficulties which 
have arisen with their gas utility. Board staff discuss 
some of these matters with the parties in an attempt to 
resolve the issues. In this fiscal year the Board received 
205 customer complaint letters, as compared to 116 in the 
previous fiscal year. 

- 25 - 


Board total expenditures for the fiscal year were 
$2,316,426 of which $733,399 was recovered from applicants 
by way of fees and costs and paid into the Consolidated 
Revenue Fund of the Province. 

At the end of the fiscal year the staff of the Board 
totalled 35. Board members and senior staff were: 

R. H. Clendining 

I. C. MacNabb 

S. J. Wychowanec 

H. R. Chatterson 

D. A. Dean 

J. R. Dunn 

D. H. Thornton 

J. C. Butler 

R. R. Perdue 

D. M. Treadgold 

0. J. Cook 

P. F. Cunningham 
S.A.C. Thomas 

D. S. Saxe 

D. R. Cochran 

C. J. Mackie 


Vice Chairman 

Vice Chairman 





Part-time Member 

Part-time Member 

Part-time Member 

Acting Director of Operations; 
Manager, Financial Analysis 
and Energy Returns Officer 

Administrative Advisor 

Board Secretary 

Board Counsel 

Special Projects Officer 

Manager, Engineering 

Appendix 'A' 

Dnder the Ontario Energy Board Act 

Approving or fixing rates and other charges for the 
sale of gas by transmitters, distributors and storage 
companies and for the transmission, distribution and 
storage of gas. 

Ensuring compliance by gas utilities with the Uniform 
System of Accounts. 

Granting leave to construct pipelines and related 

Granting authority to expropriate land for pipelines 
and related facilities and authorizing pipelines to 
cross highways, utility lines and ditches. 

Recommending to the Lieutenant Governor in Council 
the creation of designated gas storage areas and 
authorizing their use and arbitrating compensation 
payable to landowners under certain conditions. 

Approving gas storage agreements and permitting a 
transmitter or distributor to use the empty space of 
a storage company. 

Unitizing the interests in gas and oil spacing units 
and pools. 

Reporting to the Lieutenant Governor in Council, 
after hearings, on applications by gas utilities to 
sell their assets or amalgamate with other utilities 
and on applications by persons to acquire shares of a 
gas utility which would result in a holding of more 
than 20 per cent of such shares. 

Reporting to the Lieutenant Governor in Council on 
energy questions referred to the Board. 

Appendix 'A' 

Examining into and reporting to the Minister of 
Energy on Hydro rates and rate-related matters, 
pursuant to references from the Minister. 

Under the Municipal Franchises Act 

Approving the terms of a proposed by-law granting a 
franchise to supply gas to a municipal corporation or 
distribute gas in the municipality, and extending the 
term of such franchise or of a transmission 

Granting certificates of public convenience and 
necessity to construct works and supply gas in 

Under the Petroleum Resources Act 

Reporting to the Minister of Natural Resources, 
pursuant to references from him, on certain applica- 
tions for permits and licences. 

Under the Public Utilities Act 

Controlling gas utilities that contravene municipal 
by-laws prohibiting the distribution and sale of gas 
containing sulphuretted hydrogen. 

Under the Assessment Act 

Deciding whether certain gas pipelines are transmis- 
sion lines for assessment purposes. 

The Toronto District Heating Corporation Act, 1980* 

Fixing steam rates for certain customers of the 
Toronto District Heating Corporation, formerly the 
Toronto Hospitals Steam Corporation, upon appeal by 
the customer. * (Section 14 of this Act, the section 
which relates to the Board, was proclaimed in force 
on November 1, 19 82.) 

Appendix B - 1* 

(FISCAL YEAR APRIL 1, 1982 TO MARCH 31 , 1983) 

A typical residential customer, using 3.77 lO^m^ of gas annual 
for space and water heating, would have incurred an annualized cost 
approximately $778 based on rates in effect at the beginning of the 
fiscal year. 

During the fiscal year the following rate changes were granted 

Annualized ef fee 

Amount per on typical resi- 

Effective Date 10^m^ Reason dential customer 



November 23, 1982 14.48 wholesale gas costs 55 

December 20, 1982 5.03 revenue deficiency 19 

March 19, 1983 2. 14 wholesale gas costs _8 

21.65 82 

Based on the above, the annualized cost for a typical resident 
customer at the end of the fiscal year would have been approximatel 
10.5 percent higher or approximately $860. 

Appendix B - 2' 


(FISCAL YEAR APRIL 1, 1982 TO MARCH 31, 1983) 

A typical residential customer, using 4.40 lCHm^ of gas annually in 
the Western Zone, or 4.24 lCPuw in the Northern Zone, or 3.66 lO^m^ ^ n t h e 
Eastern Zone, for space and water heating, would have incurred an 
approximate annualized cost of $775 or $777 or $697, respectively, based on 
rates in effect at the beginning of the fiscal year. 

During the fiscal year the following rate changes were granted: 


Amount per 
10 V 

West North East 

Zone Zone 



Sept. 26/82 17.62 18.85 19.52 wholesale gas costs 

Feb. 6/83 2.08 2.15 2.23 wholesale gas costs 

Feb. 11/83 7.17 7.17 7. 17 revenue deficiency 

*March 8/83 2.58 2.58 2.58 revenue deficiency 

29.45 30.75 31.50 

Annualized effect 
on typical resi- 
dential customer 


North East 




$ $ 
















Based on the above, the annualized cost for a typical residential 
customer at the end of the fiscal year would have been approximately 
16.7 percent higher or $905 in the Western Zone, or 16.8 percent higher or 
$907 in the Northern Zone, or 16.6 percent higher or $812 in the Eastern 

* under review at the end of the fiscal year 

Appendix 'B - 3' 

(FISCAL YEAR APRIL 1, 1982 TO MARCH 31 , 1983) 

A typical residential customer, using 3.54 lO^m^ of gas annual! 
for space and water heating, would have incurred an annualized cost 
approximately $687 based on rates in effect at the beginning of the 
fiscal year. 

During the fiscal year the following rate changes were granted 

Annualized effect 
Amount per on typical resi- 

Effective Date 10^m^ Reason dential customer 


( approx imatel y] 

April 15, 1982 11.65 revenue deficiency 41 
December 13, 1982 13 .77 wholesale gas costs 49 

25.42 90 

Based on the above, the annualized cost for a typical resident] 
customer at the end of the fiscal year would have been approximately 
13.1 percent higher or approximately $777. 

Appendix 'C 

(Fiscal Year April 1 , 1982 to March 31 , 1983) 

Number of Customers ; 


Commercial & Industrial 


1983 1982 

( rounded ) 

1, 199,400 


1 ,338,000 




Sales Volume; (IQ^m^) 


Commercial & Industrial 


14,462 ,400 

14,650 ,400 
18, te 1, 500 

Sales Revenue; ($000) 


Commercial & Industrial 


1 ,960,800 

1 ,714,800 

Distributors' Cost of 
Natural Gas; ($000) 


1 ,894,700 

Capital Invested in Utility 
Operations (Rate Base) ($000) 


1 ,828,500 

Transmission and 
Distribution Pipelines; 




* The Consumers' Gas Company Ltd., Northern and Central Gas 
Corporation Limited and Union Gas Limited. 

decision can be changed 

Dard decisions may be challenged in three dif- 
rent ways: 

the Board may itself review a decision either 
Don the application of any interested party or 
x>n its own initiative; 

interested parties may, within twenty-eight 
lys of a decision, petition the Cabinet of the 
ntario government to review it; or 
■ upon questions of law or jurisdiction, appli- 
ition for judicial review may be made to the 
ivisional Court. 

)ther matters 

he Ontario Energy Board is responsible for 
lore than just natural gas rates. It regulates 
ther matters relating to the oil and gas industry, 
iduding pipeline construction and gas distribu- 
on franchises. 

The Board also reviews annually the wholesale 
tes proposed by Ontario Hydro and makes 
ritten recommendations on them to the Min- 
ter of Energy. The Board does not, however, 
■view the rates of municipal electric utilities. 
A more precise explanation of the Board's 
jthority and procedures may be found in the 
ntario Energy Board Act and Regulations, the 
unicipal Franchises Act, and the Petroleum 
esources Act. 

or further information, please contact: 

oard Secretary 

•ntario Energy Board 

i Carlton Street, 9th Floor 

aronto, Ontario 

B5B 1J2 

lephone (collect): 416/598-4000 ! 



Does a 

Gas Utility 


Its Rates? 



Under Ontario law the 
private gas utilities cannot 
set their own selling prices. 
If they want a rate change 
they must apply to the 
Ontario Energy Board. 

Some basic facts 

The three largest Ontario gas utilities are ( 
sumers ' Gas (serving parts of central and eas 
Ontario and operating also as Brockville < 
Grimsby Gas, Ottawa Gas, and Provincial C 
Northern and Central Gas (serving part? 
northern and eastern Ontario); and Union 
(serving parts of southwestern Ontario). 

Smaller areas are served by Natural Reso 
Gas, Inter- City Gas, and Wellandport Gas. 

All these utilities are under the jurisdictio 
the Ontario Energy Board. 

The gas utilities in Kingston and Kitchenei 
municipally owned and controlled. Their rate; 
not determined by the Ontario Energy Boar 

The Ontario Energy Board limits the inc( 
of the natural gas utilities in Ontario and cont 
the rates they charge for gas being sold to t 
customers. The Board is responsible for set) 
rates that are as low as possible while provic 
investors in the gas utility an opportunity to c 
a fair return. 

The Ontario Energy Board does not autom 
cally approve rate changes. Each application n 
be reviewed carefully at a public hearing, wr 
all interested parties can present their views. 

Ontario produces less than 2 per cent of its 
tural gas needs. Most of its supply comes from 
stern Canada by two pipeline systems, one 
oss Canada through northern Ontario and the 
ler through the United States re-entering 
nada near Sarnia. 

The federal government sets the price Ontario 
5 distributors must pay for gas from western 
nada. This factor has accounted for about 78 
r cent of residential rate increases in recent 
irs, with the balance due to the increased 
erating costs of the Ontario gas utilities. 

Phat happens 
efore the hearing? 

ie gas utility's application 

rate review begins when a gas utility files an 
plication for a rate change. The utility must 

file enough written information so the Board 

1 conduct a thorough review of the financial 
sition of the utility and the appropriateness of 
: new rates being requested. If the Board feels 
it the information is inadequate, further infor- 
ition is always obtained. The Board staff exam- 
:s all the material prior to the public hearing. 

)tice to the public 

ter receiving the gas utility's application, the 
ard instructs the utility to notify affected 

Municipal governments in the gas utility's ser- 
e area are always informed by registered mail 
or courier. For the thousands of individual 
customers, notification is by newspaper ad- 
vertisements like the following example. 
Sometimes a hearing date is included in 
the advertisement. In either case, instruc- 
tions to potential participants are set out. 



Company, has tiled with the Ontario Energy Board mom 
and interim applications for lust and reasonable rotes 
and other charges for the sale of gas. All customers at 
the Applicant are affected 

The Applicant requests Interim rate relief: 

(a) of ubout « per Met due to the Federal exci .e tax 
inert-uses of May I, 1981, and JuW I, 1981, and 

(b) to recover about $ million to prevent o revenue 
deficiency occurring in its 1982 fiscal vear in relation 
to the toir rate of return, representing rate Incr eases 
of about 4 per Mcf for residential, 4 for firm 
commercial and Industrial and 4 for Intcrruptible 
customers, and 

(c) to recover Increases in the cost of gas, faxes pnd 
other costs during the course of the moln applica- 

Copies of the applications ore available upon request 
from the Applicant's solicitors, XXXXXXXXXXXXXXXX 


Any person who intends fo oppose or otherwise Inter- 
vene in the applications shall, within 14 days after publi- 
cation of this notice, file an answer (notice of Interven- 
tion) in duplicate with the Board Secretary, 9th Floor, 14 
Carlton Street, Toronto. Ontar io MSB 1 J?, and serve Ihc 
same upon the Applicant's solicitors, either personally 
or bv registered mail. The answer shall contain a clear 
and concise statement of his Interest, his grounds for 
opposing or otherwise intervening, and his address for 
service. The Board tios directed the Applicant to for- 
ward a copy of it 1 profiled evidence to any person re- 
questing it In his answer. Until completion of proceed 
ings under the moln application, notice of hearing of 
subsequent specific requests for Interim rote relief will 
be given only fo persons who have filed an answer to the 
main application 

The Board will subsequently fix dotes for hearing. All 
persons who file on answer will receive notices of hear- 
ing Persons not filing an answer will net be entitled to 
any further notice In the proceedings. In Its decisions the 
Board may change any rate or other charge proposed by 
the Applicant. 

DATED at Toronto this day of 

J 9 

Board Secretary 


Who can participate? 

All gas customers, whether residential customers 
or large industrial users, are entitled to parti- 
cipate. So are municipalities and groups or asso- 
ciations that wish to present a collective point of 
view. Those that do participate are called inter- 
veners. Although lawyers or agents frequently 
represent intervenors, this is not essential;, indivi- 
dual citizens do appear and speak for themselves. 

How to intervene 

Within the period specified in the notice, usually 
two weeks, the prospective intervenor must 
inform the Board in writing of the intention to 
intervene, sending a copy to the gas utility's 
lawyers as well. 

The intervenor should say if he or she wishes 
to appear at the hearing. Recognizing that some 
people cannot attend at all stages or arrange for 
someone to be present on their behalf, the Board 
Secretary will try to arrange a time when a partici- 
pant may be heard. 

Although it is sometimes more effective to 
appear in person (or be represented by a lawyer, 
agent, or a group spokesman), a simple interven- 
tion can be made by writing a letter to the Board 
Secretary for presentation at the hearing. 

Whether a letter is written for filing at the 
hearing or a party wishes actually to participate, 
the written notice of intervention should indicate 
why the person has an interest in the outcome of 
the hearing and the reasons for supporting or 
opposing the gas utility's application. A written 
submission providing other details may also be 
helpful. An intervenor may file his submission 
later, after requesting and reading the utility's 
pre-filed evidence. 

Board staff and counsel are available to assist 
the public to intervene. The Board Secretary 
should be contacted if assistance is required. 

Once the date and location of the hearing have 
been established, the Board Secretary will 
arrange for the intervenors to be notified. 

Pre-hearing conferences 

It is often helpful if participants hold a meeting 
to review the material for clarification, to define 
their differences, and to arrange procedural mat- 
ters before the hearing. All intervenors receive 
notice of, and are encouraged to attend, these 
public conferences. 

The hearing 

Anyone is welcome to attend a hearing, w 
may last from a few days to several weeks, h 
ings are usually held in the Board office 

At the hearing the utility must prove th; 
needs the rate changes applied for. The B< 
usually hears the utility's evidence first. Ir 
venors may ask questions of the utility witnc 
or make their views known by giving evidenc 
by presenting a submission, or all three. Per 
giving evidence can be questioned by all par 
pants at the hearing, including lawyers repres 
ing the utility, Board staff, and the B< 
members themselves. 

A transcript of the hearing is taken. A co{ 
available at the Board offices for inspectior 
any member of the public. 

Interim hearings 

If a gas utility believes that a change in its co 
buying gas or in other costs of doing business 
cause it to suffer immediate financial difficul 
it can apply for an interim rate change. T 
interim rate applications also require public h 
ings, which last only a day or so. When int< 
rate changes are granted they are still subje( 
review at the main hearing. 

After the hearing 

The Board's decision and order 

After hearing all evidence and submissions, rl 
Board members who heard the case delibc t 
and make a decision. The Board's decision is ta 
written and released. 

The Board may deny the rate change* 
quested, grant a portion of it, or approve pi 
entire request if it is justified. The decisio 
accompanied by reasons for decision. 

Finally, a Board order is issued, and the I 
changes become effective. All participants rec'4 
copies of the decision and order, which are h 
available to the public. 

JUN 3 1992